Income taxes, that is, taxes that are levied as a percentage of income, have the virtue that people will actually have the money to pay them. (You could take 90% of people’s total income, and leave them without money for food, shelter, and clothing. In fact, even in steeply progressive income tax systems, this doesn’t really happen; even in times and places where the top bracket is something really high like 90%, this only means that every dollar you make in excess of $1 million–or whatever the floor for the bracket is–is taxed at the rate of 90 cents on the dollar. I’m not necessarily defending 90% top income tax brackets by the way; and currently, the highest Federal income tax bracket in the U.S. is something like 39%.)
A potential problem with property taxes is that someone might own property which is appraised at a high value, yet not necessarily derive any income from that property. Property taxes can thus essentially force “development”/“progress”/“suburban sprawl”–take your pick what you call it; lots of people don’t really like it much, and even if you don’t think the government should be actively trying to stop it, I don’t think the government should be practically forcing it to happen.
In addition to the social and ecological effects, there is also the sheer injustice of making some nice old farmer sell the family farm that’s been in his family for umpteen generations, when all he wants to do is make a modest living growing peanuts, but because they just put in a Wal-Mart down the road the property values have now officially skyrocketed, he can’t afford to pay his property tax bill out of what he makes selling peanuts, even though his peanut farm is actually still economically viable, and he must sell out and move to a soulless suburban tract house which he deeply hates.
You might be able to avoid this sort of thing by some expedient such as only levying property taxes on what the person actually paid for it, and not on the unrealized potential value of what the property would likely go for on the open market. But this sort of gaping loophole would probably invite all sorts of abuse by clever lawyers and accountants, and if you used a tax with a “frozen” base as your main source of government revenue, you would probably drastically downsize government. Many radical tax reform schemes seem to actually be radical libertarian government-shrinking schemes; I think if people want to drastically shrink what the government does, they should be upfront about it with the voters, and not screw with the tax code in hopes of starving all the popular government programs to death on the sly.
Some more specific points:
Why would it be any harder to cook the books on the value of your land than on the value of your income? It’s not like real estate laywers and real estate attorneys are particularly inept at generating convulution and obfuscation when they want to.
So people would go from hating the income tax people to hating the property tax people. Their would still need to be a mechanism for assessing and collecting taxes and going after people who don’t pay up.
Well, it shifts the government from one part of your finances to another. Better fax those plans for your new home improvement projects to the tax people; your assesment may have changed!
